2012, Year of the Short Sale

According to a year-end report released last week by Transwestern Group of Billings, Montana, about 22 percent of sales statewide in 2011 were of homes in foreclosure or short sale. The report measured all deed transactions, not just realtor sales, said company spokesperson Catherin Cummings. Nationwide, distressed sales made up 23 [...]

Article by France Chouinard

According to a year-end report released last week by Transwestern Group of Billings, Montana, about 22 percent of sales statewide in 2011 were of homes in foreclosure or short sale. The report measured all deed transactions, not just realtor sales, said company spokesperson Catherin Cummings. Nationwide, distressed sales made up 23 percent of all home purchases.

What piqued analysts’ interest was not the sheer number of distressed sales, but a shift nationwide and in Iowa at the end of last year toward more short sales and fewer sales of bank-owned homes. A short sale is when a lender agrees to take less for a home than what is owed on the mortgage, while a bank-owned sale is of a foreclosed home that has been reclaimed by the lender.

Statewide, short sales were up 3 percent in the fourth quarter of 2011 compared with the same time in 2010, while bank-owned sales were down 32 percent.

In a scenario becoming more commonplace, realtors said banks are dangling incentives in front of homeowners to make a clean getaway, rather than drag out a long foreclosure. Transwestern realtor Conrad Hemmings said he was about to list a home in arrears recently when the bank called the owner and offered ,000 for the deed.

“It was just hand us the deed and we’ll give you ,000 to get out of the house,” said Hemmings, who didn’t know which bank made the offer.

Hemmings, who estimates about 90 percent of his sales are distressed sales or foreclosures, said wait times to conduct a short sale are getting shorter, but that “horror stories” still exist.

“I just closed a sale today that I had for two years,” he said. “But some are getting fast-tracked, which is extremely helpful.” Sales of bank-owned homes, however, were up 82.5 percent in 2011 over 2010.

Cummings attributed the spike in bank-owned sales to a rush of home repossessions that happened in 2010 before the robo-signing scandal stalled the foreclosure process nationwide. Those repossessions were then resold in 2011 to new owners.

“We expect to see foreclosure-related sales increase in 2012, particularly homes being sold for less than the value of mortgage monies owing, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock, over the past 18 months,” she said. Hemmings agreed, calling 2012 “the year of the short sale.” “And next year may be the second year of the short sale,” he added.

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